Vinod Kumar Mitta & Sons HUF, Delhi V. Pr.CIT- 13, Delhi

ITA 3752/DEL/2018

AI Insights

The case involves Vinod Kumar Mittal & Sons HUF, who appealed against the revisional order of the Pr. CIT, Delhi-13, which set aside the original assessment order for the Assessment Year 2014-15. The original assessment was completed under Section 143(3) of the Income Tax Act, 1961, where the income was assessed as declared by the assessee. The Pr. CIT later found the assessment to be erroneous and prejudicial to the interests of the revenue, primarily due to alleged inadequate inquiry into suspicious transactions related to Long Term Capital Gains (LTCG) and unsecured loans. The ITAT, after examining the submissions and evidence, concluded that the AO had conducted a reasonable inquiry and that the revisional powers under Section 263 were not justifiably invoked in this case.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 121638 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 20-02-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 17-05-2018
• Other Referred Cases: Smt. Sudha Eashwar vs. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 263; 2; 44AD; 201; 43; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F” DELHI BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI YOGESH KUMAR US, JUDICIAL MEMBER I.T.A. No.3752/DEL/2018 Assessment Year 2014-15 Vinod Kumar Mittal & Sons HUF H. No. 18, Pocket-4 & 5, Sector-23, Rohini, Delhi. Vs. Pr.CIT-13, Delhi TAN/PAN: AAEHV3765M (Appellant) (Respondent) Appellant by: Shri Mayank Patwari, CA Shri Kalrab Mehrotra, Adv. Respondent by: Shri T. Kipgen, CIT-DR Date of hearing: 21 02 2023 Date of pronouncement: 12 05 2023 O R D E R PER PRADIP KUMAR KEDIA, A.M.: T he ca pti oned a ppeal has been file d at t he i ns tance o f the assessee agains t the re vi sional ord er of the l d. Pr. C IT , D elhi- 13 (‘Pr. C IT ’ in sho rt ) dat ed 28. 02. 2018 wher ei n or der p assed b y t he Assessi ng Of fi cer (AO ) u nder Secti on 143( 3) of t he I nco me Tax Act , 1961 (t he Act ) dat ed 29. 02. 2016 concerni ng A Y 201 4- 15 was hel d t o be err one ous i n s o f ar a s preju dicial to t he i nterest of t he revenue wit hin t he mea ning of Sect ion 263 of the Act . 2. Br ie fl y s tated, t he assessee, a H indu Undi vi ded Famil y (H U F) fi led its ret urn of i nc ome at Rs. 8, 58, 090/- fo r A ssess ment Y ear 201 4-15 in ques tion. T he assess ee i nter ali a decla red income under t he head ‘ busi ness income’ compute d unde r Secti on 44AD ‘Ca ptial G ai ns ’ and ‘Inco me fro m O the r S ources’ etc. A scruti n y I.T.A. No.3752/Del/2018 2 assess me nt w as ca rrie d o ut unde r Se cti on 143 (3) of t he Act f or A Y 2014-15 in quest ion w he reb y the total income w as als o assessed at Rs. 8, 58, 090/- as returned by the asses see. 3. T he assess ment c arri ed ou t b y t he A ssessing O fficer w as, how e ver sought t o be re vis ed b y the Pr. CIT . A show ca use not ice dated 22.1 2. 2017 w as issued to t his effec t. “S h ow c a us e no t i c e un de r Se c t i o n 2 6 3 o f t h e I nc o m e Ta x A c t f o r A . Y. 2 0 1 4 - 1 5 - r e g . * ** * ** * * * * * ** * Th e A s s e s s m e n t f o r t h e A . Y . 2 0 1 4 - 1 5 i n y o u r c as e w as c o m p le t e d on 2 9. 0 2. 2 0 16 u /s 14 3 ( 3 ) o f I. T . A c t o n t he t o t a l i n c om e of R s . 08 , 5 8, 0 93 / - . It i s s e e n f r o m t h e r e c o rd s t h at t h e A O . di d n ot m ak e p r o pe r e nq ui r ie s , no r di d i nv e s t i gat e / v e r i f y v a r i ou s d e ta i l s f i l e d an d e v e n o m i t t e d i s s ue s e s p e ci al l y w i t h r e s pe c t s u s p i c i ou s L on g Te r m C a pi t a l G a i n on s h a r e s, r e n de r i ng t h e as s e s s m e n t s o m a d e t o be e r r o ne o u s , so f a r as i t i s pr e j u d i c i a l t o t h e i n t e r e s t o f r e v e n ue . I t h e r e for e i n t e n d t o r e v i s e t h e or de r p a s s e d on 29 . 0 2 . 2 0 16 u/ s 14 3 ( 3 ) o f t he I . T . A c t f o r A . Y. 2 0 1 4 - 1 5. Yo u m ay a t te n d o n 1 1 . 0 1 . 20 1 8 a t 3 : 0 0 P M , i n p e r s o n o r t h r ou g h y o u r A u t ho r i z e d R e pr e s e nt a t iv e a nd s h ow c aus e w h y t h e or d e r u / s . 1 43 (3 ) of t h e I T. A c t d a t e d 2 9. 0 2 . 2016 f o r A Y 2 01 4 - 1 5 s ho ul d n o t b e r e v i s e d. Y o u r s fa i t hf u l l y , P r . C o m m i s s i on e r o f I n c om e T ax - 1 3, N e w D e l hi . ” 4. T he Pr. C IT ev ent uall y se t aside the assess ment orde r fra me d under Secti on 143 (3) a nd di recte d t he A ssess ing Of fi cer to re do the ass ess ment i n t erms of observat ions made in revisi onal order. 5. A gg rieve d by the re visi onal o rde r, t he a ssesse e pre fe rre d appea l before t he IT A T seeking to challenge the revis ional orde r. 6. When the matter w as calle d fo r hearin g, the ld. couns el for the asses see ad verted t o t he s oli ta ry sh ow ca use not ice and I.T.A. No.3752/Del/2018 3 submit ted tha t t he show c aus e noti ce broadl y alle ges fa i lu re o f the A ssessi ng O fficer to invest i gate/ ver if y detai ls f iled in resp ect of suspicious transac ti ons r ela ting to Long Te rm C ap ital G ain on sha res rende ring t he assess ment so made to be e rr one ous in so fa r as it is prej udic ial to t he interest o f the reve nue. 6. 1 In this re ga rd, the ld. couns el for the assessee submi t te d t hat the cas e w as sel ecte d f or scrutin y mainl y on the grounds of suspicious t ransac tions of L ong T er m C apital G a ins . The l d. counse l adv er te d to the re plies and submi t te d t ha t th e spec ific re pl ies w er e p la ced before t he AO w ith regard t o the Lo ng T er m Capit al G ai ns of R s.43, 02, 41 6/ - e ar ne d by the A ssessee. The assessee inter al ia file d the proof of a cquis it i on of sha re s, cop y of sha re ce rti fica tes, demateri al iza ti on request for m e tc and als o the re le vant c ontract note s tow ar ds sale of s ha res. Copy of stat ement of D emat account and co py of ledge r account were a ls o submi t ted be fore the Ass essing O ffice r to vindicat e the bona f ides of the trans ac tions of shares. T he re for e, the a ssessee, on it s part, has pro vi ded all ma teri al fa cts to the Assessi ng Of ficer as c all ed up on by the A O i n the cou rse of t he ass ess ment proceedings and he nce, the on us placed upon the a ssesse e s tood d isc ha rge d and AO did not se e any perc ept i ble reas on whic h ma y cal l for extende d enquir y. T he i nco me w as assessed a ccordingly. O n the other hand, the Pr. C IT in t he s uper vi so r y proce edi ngs, has attempt ed to p lace impossi ble burden on t he assess ee t o sati sf y the s uspi cio n of the Pr. CIT reflect ed in t he revis io nal orde r by a ve ry generic obs erva tio ns wit hout pointi ng ou t any s ubstantive erro r in the ma teri al pl ace d. T he obse rvati ons of the Pr. C IT about n on pro duc tion o f de mat ac count is c ont ra ry t o t he c onte nts of re pl y place d be fore t he A ssess ing O ffi cer. T he ld. couns el next I.T.A. No.3752/Del/2018 4 contend ed that the all egat ion of s us pic ious transacti on i n pen ny sto ck is t ot all y u nfou nde d. A s submi tted, the t erm ‘Penn y St ock’ has not bee n defined under an y e nact ment cu rre ntl y in fo rce. There is no j ust i fi able re ason to att ribute m ala f ides on the assessee me re l y because t he Pr. C IT considers a tr ansaction i n pa rt ic ul ar s t ock to be penn y st ock. A s fur th er s tated, the trans ac tions ha ve bee n ca rried out t hro ugh the platf orm of the Stock E xchange a nd that too i n 15000 number shares onl y. The sha res w ere tr ansa cte d thr ough t he i nter me diarie s / St ock B r oke rs dul y r egist ered w it h the SEB I. Th e Pr.C IT has giv en undue consi derati ons t o t he s o c al led abnormal incr ease in the pr ice b y w rong ly invoking the pr inci pl es of pr eponde ra nce of probabi liti es. It is t rite tha t t he deg ree or s tan dar d of pro of requi re d to es tabl is h a fact cannot be de fi ne d preci sely. T he d rastic i ncreas e or decrea se in t he pri ce of la rge n umber of s hares in a given yea r is an ordinar y phenome non i n t he stock market w here price dis co ver y ha ppe ns depe nding on host of u ncerta in factors both inte rn al and e xt ern al. Th e SE B I is t he w a tchd og fo r a ny ma ni pulat ive ac tions in t he st oc k ma rket. T he assessee has entered into meager transa cti ons o f sale of me re 15000 sha res hel d b y it and no a dve rse SE BI re port is avai lable implicati ng the assesse e for an y co ncerte d or man ipulat iv e acti on w hic h ma y gi ve ris e t o an y kind of s uspicion of an y fict io ns gains. A s further as serted, the A O i n its ow n w isdom has taken a plausi ble vi ew i n disc ha rge of his q uas i -j udic ial func ti on ba sed on facts avai lable to hi m. Th e view taken by t he A ssessi ng O ff ic er thus can not be out ri ghtl y rejec te d a nd bran ded as err oneous per s e wi thin t he sw eep of supervisor y j uris di cti on b y invoking doct ri ne of preponde ra nce of pro bab ili ti es. I.T.A. No.3752/Del/2018 5 6. 2 T he l d. coun sel t hus c ontended t hat the Assess ing O f fice r has tak en a fai r view in the tota l it y of ci rc umstances whic h is not capa ble of cas ual displace ment b y a s et as ide act ion i n t he a bse nce of an y c ogent mate ri al in t he poss ess ion of t he P r.CI T. The P r. CIT has s ough t to disl od ge a quas i-j udic ial action i n a cas ual ma nne r simpl y becaus e in his opin ion a greater inqui ry in the issue was neede d. T he ld. counse l s u bmi tte d tha t expecting an Assessi ng O fficer t o e xami ne each a nd eve r y i te m of inc ome or e xpenditure or ot he r t ransacti ons to the hilt is f ra ught w i th se rious const ra ints and is neit he r feas ible nor des irab le. It w as finall y contend ed t hat qua si -j udi cia l act ion o f Assess ing O ffice r ca nnot be lightl y s t ruck dow n wit hout show ing an y de fi nit e erro r r esult ing in prejudice t o the re ve nue. The A ssessi ng O ffi cer has conclu ded t he is s ue having re ga rd t o the t ot alit y of facts and thus cannot be br an ded as er roneou s in t he name o f al leged inadequac y of i nqui ry. 6. 3 T he ld. c ounsel further conte nds t ha t while t he s how cause noti ce d oes not ma ke a ny reference to th e unse cu re d l oan recei ved, no pr el i mi na ry i nqu ir ies w ere made b y the Pr. C IT hi mse lf e ve n a t t he revi si onal pro ceed ings. T he assessee w as havi ng no real opport unit y to de al w ith the obs er vat ions of P r. CIT tow ard s i ndepe nde nt verif icat ion of s uch loans. N otwi thstandin g a tota l lack of e ffe cti ve oppor tunit y to a ddress t he iss ue be fore Pr. CIT , the issue was not overlooke d but a reas onable inqui ry w as ma de b y the Asse ssing O ffi cer in this rega rd too. In respons e to que ries ra ised, in the co urse of t he assess me nt procee di ngs, the A ssessee had filed all mate rial pa rt i cul a rs in res pect of eac h and ever y loan received as wel l as gi ven. T he confi rmations from lenders we re a lso placed be fore t he A ssessi ng O f ficer along wi th the bank s tateme nts and re turn of income of the lende rs. I.T.A. No.3752/Del/2018 6 There fo re, exer ci se of supe rvis or y j urisd ic tion i s w ho ll y unj us t ifiable on the iss ue wi t hout making re fe re nce to ci rc ums ta nces w hich w ar rants necessi ty o f independ ent ve ri fica tions. T he ld. coun sel th us urged fo r s et tin g as i de th e re vis ional order of t he Pr.C IT i n quest io n an d restorat ion of the assess me nt orde r. 7. T he l d. D R for t he Revenue, on the ot he r hand, re lied up on the re visi onal or de r and con tende d t hat t he Assess ing O ffice r has not exe rcise d t he due di ligence expected of him w hile exa mi ning the iss ues involv ed w hic h the A ssessing O ff icer has fai led t o pe rfo rm. It w as sub mi tte d that t he A O has me rel y accep te d the doc uments placed before hi m wi thout re quis ite e nqu iry thereon. The ld. D R re fer re d t o a nd relie d up on t he dec isi on of the Trib una l i n the c ase of Sm t. Sud ha E ash war vs. IT O in ITA No. 2342/ Chny /2019 or der dated 02. 01. 2020. T he ld. D R accordi ngl y submi tted tha t the rev isi onal c ommiss i one r has ac te d w ithi n four c orner s of law and cons equen tl y revisi ona l ac tion on the ass ess ment or der does not ca ll fo r an y inte rference. 8. We have ca re ful l y c onsi de re d t he rival s ub mi ss ion s and pe rus ed the revisi ona l order passed by the P r. C IT under S ect i on 263 of the Act as well as other mate ri als refer red to and rel ie d upon b y t he respec ti ve pa rties an d ca se laws cit ed. 8. 1 Super viso ry j uris di cti on ve ste d unde r Sect io n 263 of t he A ct enabl es t he concerned P r. C IT/ C IT t o review the r ecords of a n y proceed ings a nd order passe d therei n by t he A O . It e mpowe rs the Revis ional C ommi ssioner c oncer ned to call f or and exa mi ne the reco rds of anothe r pr oceeding under the A ct an d if he cons i de rs that an y order pass ed there in by t he A O is erro neous in so far a s it I.T.A. No.3752/Del/2018 7 is pr ej ud ic ial to t he in te res t of the Reven ue, t he n he ma y (afte r gi vi ng the assess ee a n op port un it y o f be ing hea rd and afte r ma ki ng or c aus ing t o be made suc h i nqu ir y a s he deems nece ssar y), pass s uch orde r ther eon as the c ircums ta nces o f the case jus ti f y, in cl uding the order enh anci ng o r modif yi ng the assess me nt or ca ncell ing the asse ssme nt and di re cting afresh assess me nt. T hus , the revis iona l powe rs confe rred on the Pr. CIT /C IT u nde r s. 263 of the Act are of wi de ampl it ude w ith a view t o ad dress the revenue ris ks which a re obj ec tive l y justi fi able. 8. 2 In the i nst an t cas e, the s ubs ta nt ive issue t hat e merges f or adju dicati on is w hether t he P r. CIT under t he umb re ll a of re vis ionar y pow e rs is en ti t led t o up set the finali ty of assess ment proceed ings bef ore the A sse ssi ng O fficer w he re the Assessi ng O fficer has a l le ge dl y c ommi tte d err or i n p assi ng asses s me nt o rde r w ithout proper ve rificat io n of t he pr opriet y of LT CG t ra nsact ions and unsecured l oans recei ved d uri ng the year. Implicit in the que st ion, i n t he c ontex t of facts a nd ci rc ums ta nces of the cas e, is thus sco pe o f pow ers of rev is iona l commi ss ione r i n th e eve nt of all eg ed i na de qua cy of inqui r y into va rious aspect s of a n i ssue. 8. 3 O n perusa l of the show ca use notice (SCN ) is sued by the Revisional C o mmi ssione r p ropos ing to set aside t he assess ment order pa ssed by t he A ssessin g O ffice r unde r Sec tion 143(3 ) o f th e A ct, w e not ic e that t he P r. CIT is es sent iall y diss atis fi ed w it h the degree of enquir y made i n res pect of L ong Te rm Ca pita l Gain (L TCG ) ar isi ng to th e ass essee on sale of s hares of T ur botech Engin ee ri ng L t d. w hich is a llege d t o be a pe nn y stoc k. N o que st ions a re alleged t o have b een raise d b y the Pr. CIT i n the cours e of re visi on al procee di ngs t ow ards ve rac it y of unsec ure d loans eit he r b y w a y of i ni tia l SCN or in t he course of subs equent I.T.A. No.3752/Del/2018 8 re vis ional procee dings. 8. 4 T o a pprecia te t he iss ues in pers pective, w e notice that speci fi c que ries w ere r ais ed b y t he AO on both counts namel y LT CG ar isi ng on sale of s ha re of T urbote ch as w e ll as loans recei ved b y the assesse e duri ng the ye ar. The assessee i n co mpli ance of t he inq ui ries s o made by t he Asses si ng O ffic er is sta ted t o have file d the de ta ils and the e vi dence s su ch as the pro of of acquisit ion of s ha res, share certi fi cate s, con trac t not e tow a rds sale of shares and the D e ma t a ccou nt show in g t rans fe r of s hares etc. givin g rise t o L TCG . It is also the ca se of the as sessee t hat sha res we re t rans fe rre d on th e platform of t he s tock exchange throu gh aut ho ri ze d brokers a nd no ad verse re por t of t he SE BI w as confr onted to the assesse e ei th er bef ore t he A ssessin g O fficer or by th e Pr. C IT i n the re visional proceedi ngs. Li kew is e, the loa n confi rmat i ons, IT re tu rns of the l ende rs as wel l as the ba nk sta tement of the len ders w ere fu rnished i n the c ourse o f the assess me nt to es tablish the identit y, capaci t y a nd ge nui ne ness of the transac tions. T he A ssess ing O fficer di d not find a ny reas on t o doubt suc h docu ments to l au nc h fu rthe r v eri fi cati ons whic h the Pr. CIT thinks, ought to have been done. Perti ne ntl y, th e law does not ne cessar il y requi re to s tret ch e nquir ies and verif icat ions t o the extent w hich ma y, a t ti mes, t an ta mount t o oppre ssion a nd ha rassment of a t ax p ayer. T he A sse ssing O fficer, in the ins tant case, has ar ri ve d at a concl us ion after collect in g requisi te evidence s of exter nal nat ure an d in the absenc e of a ny adverse ma teri al per se, ca me t o a conc lusion w hic h is pl aus ible f or a reas o nab le perso n ins truc ted in la w. The obj ect of revis io nal pow e r is not to im pi nge upon th e pow ers o f t he Assess in g O ffice r to f ra me the ass ess me nt and i nte rfe re therew ith in a ll ca ses mer el y I.T.A. No.3752/Del/2018 9 on acc oun t of some inade quac y i n ma nne r and ex te nt of enquir y. 8. 5 In the absence o f any pe rc ep ti bl e error in the action of the A ssessi ng O ff ice r pointe d out i n the revisi onal order, the explana tio n o ffe re d on be hal f of t he assessee appe ars p lausi bl e. The A ssess ing O ffic er, in the in sta nt ca se, has s pec ific al l y examined both the issu es ra ise d b y t he Pr. CIT albe it not proba bl y in the manner i n w hic h t he P r.C I T w ou ld have lik ed but t his canno t be the s acrosanc t grou nd f or ass umption of j uris di ct ion under Sec tio n 263 of the A ct. The As sessing O ff ic er d id ra ise the que st ions o n poi nt in iss ue and there appears t o be act ive appl icati on of mi nd b y t he A ss essing O ffic er a lt ho ugh, d id not meet t he expec ta tion of t he Pr. C IT . 8. 6 U nder the c ircu ms tances, one ca nnot poss i bl y say t hat the A ssessi ng O fficer had s leepw a lked on t he is sue. Notic eabl y, the Pr. CIT hims el f ha s not ente red i nto any mi ni mal inquir y o n the issu e hi ms elf, i f so consi dered expe dient and t here is not eve n prima fac ie de mo nstrat i on of fal lac y in the act i on of t he Assessi ng O fficer w hic h rende red t he orde r erroneo us and w hich also simultane ousl y ca use d prej udice to the r eve nue. Me re ly bec ause the expec ta tions of t he R ev is iona l C ommi ssioner are purpor te dl y not met, it sho uld not, in our op in ion, necessa ri ly t rigge r re vis ional acti on under Secti on 26 3 of the Act in eve ry case. 8. 7 O n a broade r reck oning of the pec ul iar facts of the cas e, we concu r w it h the ple a raised o n behal f of the ass essee that all eg at ions in t he revi si onal or der a re not j ust ifie d and t he re is no s yst emat ic e ffor t on t he part of the Pr. CIT to support the all eg at ions. A reference made on behal f of the Reven ue in the case of Su dha E ashwar (s upr a) is go ve rne d by its ow n s et of fa cts. T he I.T.A. No.3752/Del/2018 10 appl icabil it y of Section 263 w as not the subj ect matte r of cont rove rs y therein. The order of c o-o rdi na te Bench does not tend to remove the fet t ers pla ced on t he scope o f Sec tion 26 3 u nder consi derati on i n th e prese nt case. Some inadeq uac y w i ll not rende r each and eve r y orde r e rrone ous o n t he to uchsto ne of S ect ion 263 of t he A ct w here t he e xtent of inqui ry has bee n quest i oned b y the Revisional Com mi ssio ner. The iss ue requi res to b e looked in the context and s et ting of fa cts i n eac h cas e. We do not f ind an y ove rr iding reas ons subs is ti ng in th e facts of present cas e. We thus fi nd that the foundati on i n the exercis e of revi si onal j urisdiction is mi ssi ng i n the pres ent ca se. 9. Resul tant l y, t he i mpugne d or der of the P r.C IT passed unde r Sect ion 263 of t he A ct is set asi de a nd canc el led and t he o rde r of the A ssess ing O f fi cer under Section 143(3 ) is r est ore d. 10. In the res ul t, the appeal of t he asses see is allow e d. Order pronounced in the open Court on 12/05/2023. Sd/- Sd/- [YOGESH KUMAR US] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /05/2023 prabhat